McDonald's: Dow Earnings Analysis

Dow component McDonald's announced its fourth-quarter results.

Quarterly Synopsis: McDonald's fourth-quarter net income increased 3% to $1.2 billion and earnings per share climbed 5% to $1.16, boosted by a smaller float. Revenue ascended 4% to $6.2 billion. The operating margin declined from 31% to 30%. Quarterly numbers were hampered by currency effects. During the quarter, the McDonald's franchise segment, representing a third of total sales, gained 5%, outperforming the company-owned segment, which boosted its top line by 3%. Despite higher expenses in most categories, the company's net profit margin remained in ample territory, at nearly 20%. That profit spread compares favorably to those of rivals.

Earnings Performance: McDonald's delivered adjusted earnings of $1.15, narrowly missing the consensus Wall Street estimate of $1.16. By comparison, McDonald's has an average historical earnings beat rate of 3.3%. Its top-line tally of $6.2 billion exceeded the consensus forecast by 0.3%. By comparison, McDonald's has an average historical sales beat rate of 0.8%. Its stock declined modestly on the report, falling as much as 0.8%, as the Dow gained 0.2%. Global comparable store sales, a critical growth measure, are up 4% to 5% in January.

Dividend Information: McDonald's pays a quarterly dividend of 61 cents, converting to an annual yield of 3.3%. It ranks as the ninth highest-yielding Dow stock. The company has boosted its distribution 10%, 15% and 28%, annually, on average, over one-, three- and five-year horizons, ranking as a top blue-chip stock for income-oriented investors.